Case: Nestlé Maggi

In early June 2015, Paul Bulcke, Nestlé S.A.’s global chief executive officer, took an urgent flight to India, having
been advised that one of the company’s highly popular brands, Maggi, was banned from its second largest market.
The issue was further aggravated when the ban spread to India’s neighbouring countries, Singapore and Nepal.
Food safety agencies of various developed countries, including the United Kingdom, soon became concerned.
India’s food regulatory body, the Food Safety and Standards Authority of India (FSSAI), labelled Maggi as unsafe
to human health after samples showed excess levels of lead and monosodium glutamate (MSG). Following
considerable outrage over food safety fears in India, Nestlé withdrew the entire stock of the product that had been
distributed at retail channels across the country. Nestlé persistently claimed that the product was safe. However,
the decision to recall the product was made to retain consumer confidence, as noted in a press release issued by the
company:
The trust of our consumers and the safety of our products is our first priority. Unfortunately, recent
developments and unfounded concerns about the product have led to an environment of confusion for the
consumer, to such an extent that we have decided to withdraw the product off the shelves, despite the
product being safe.

The stock recalled from the market was worth ₹2.1 billion, with an additional cost for materials valued at ₹1.1 billion,
affecting various stages of the supply chain. In terms of business share and potential, Nestlé had no way of avoiding the
product line’s impact on its portfolio in the Indian market. Nestlé’s management team was busy drafting a new business
strategy to relaunch its highly popular Maggi brand. Etienne Benet, then managing director of Nestlé India, stated, “We
are determined to resolve the Maggi noodles issue in the best possible way. We will return Maggi to its rightful position
as ‘the most trusted food brand in India.’” The management team was grappling with an improved re-positioning
strategy to help retain its market share in India. Nestlé also wondered what critical role pricing would play in influencing
consumer purchase decisions during Maggi’s proposed relaunch.

THE MAGGI CRISIS

In India’s largest state, Uttar Pradesh, standard testing of Maggi samples revealed excess quantities of lead and
MSG. The state directed the inquiry to the FSSAI and they confirmed the allegation. The FSSAI stated, “We have
tested Maggi samples at Kolkata's referral laboratory. The test results show that there are added monosodium
glutamate and excess of lead. We have ordered further sampling.” The product was found to contain 17 parts per
million (ppm) of lead, which exceeded the permissible limit of 0.01 ppm. Nestlé refuted all claims, asserting that
the lead content in the product was actually less than 1 per cent of the allowed limit. The Nestlé spokesperson said,
We do not add MSG to Maggi Noodles, and glutamate, if present, may come from naturally occurring
sources. Food regulators in India also do not specify any limit for the presence of MSG [and/or]
glutamate. We are surprised with the lead content supposedly found in the sample. We monitor the lead
content regularly as part of regulatory requirements, and tests at our own accredited laboratories as well
as those by independent, external-accredited laboratories have consistently shown the results to be well
 within the permissible limit.
Losses
The controversy caused both tangible and intangible losses for the company. Nestlé India incurred a direct loss of
20 per cent revenue due to the Maggi ban and nationwide recall. According to Brand Finance, the brand value of

Maggi was anticipated to fall by approximately ₹13 billion. Nestlé’s stock fell by 15 per cent, resulting in a market

capitalization loss of ₹100 billion. However, analysts anticipated that the company would rebound very strongly
with full volume recovery within a year. In addition, brokerage firms also predicted a sharp comeback on stock
values. One analyst suggested, “Nestlé stock is a good long-term buy for investors as fundamentally the company
has some great brands that give earnings growth visibility and cash flows.”

The recall had an impact on the entire value chain. It affected all direct and indirect stakeholders. The 1,500
permanent employees directly involved with Maggi production were temporarily shifted to training activities and
trade building exercises. Suppliers who had strong dependence on Nestlé were exploring the prospect of new
customers. One supplier stated: “We were supplying around 200 tonnes of spices per month to Nestlé. That has been
affected. Now, we are trying to find new customers, and in future we would try to reduce large dependence on a
single client.” To recover all kinds of losses, it became imperative for Nestlé to design a comeback strategy. The
relaunch strategy would require a focus on re-positioning, pricing, and other operational issues. It was highly likely
that such a crisis could extend to other product lines or brands and also spread to different continents at any stage of
the business life cycle. Nestlé needed to take various proactive measures to ensure that this major crisis would not be
repeated at any point in the future.

THE ROLE OF PRICING

In 2014, Nestlé recorded its slowest sales growth in the previous five years. The Maggi recall had further spread the
negative publicity among buyers. Bulcke admitted that “consumer trust [had] been shaken.” India was the second-
largest market for its Maggi brand. The Swiss food giant confessed that “India is important to Nestlé,” and that it
would strive to sustain its customer share in the Indian market.
With respect to marketing, pricing could directly influence consumer purchase behaviour. The impact was expected
to be even more significant when relaunching a product that had suffered a major market share loss due to a product
recall. To use pricing as the centre of the comeback strategy, it was essential for Nestlé to achieve excellence at
meeting the ideal product and market level. The strategy required managing the trade-off between benefits and
price. A value map was the ideal tool to provide a snapshot of how consumers perceived that trade-off. All
competing brands needed to be mapped, including Sunfeast, Bambino, Top Ramen, private labels, and other local
brands. The exercise would provide useful insight for the decision-makers to formulate a strategy that could achieve
ideal pricing at the best product and market level (see Exhibit 1).
The increased demand-versus-supply gap created by the Maggi incident benefitted Patanjali Ayurved Limited
(Patanjali), India’s fastest growing Ayurvedic company. The company had numerous product lines to diversify its
business, so it was easily able to enter the noodles market. The product would be sold through the vast distribution
network of Future Group, India’s major retail chain. The promoters of Patanjali’s Atta Noodles claimed that the

upcoming product would be superior to Maggi, but would be sold at only ₹15, compared to ₹25 for an equivalent
size of Maggi.

Of the many possible strategies at its disposal, Nestlé concentrated on three key options to re-enter the Indian
market: increase value with the same prices, increase value with lower prices, or increase value with higher prices.
Undoubtedly, Maggi would increase both tangible value (making the product safe for consumption) and intangible
value (promote awareness through effective labelling). As Nestlé prepared to relaunch its product with enhanced
value, management was concerned about the decision over new pricing. Anticipating the customer’s response to the
price change, the core team was busy pondering various factors that would influence the market’s response to a
change in pricing.

THE URGENCY FOR A COMEBACK

Emerging economies already contributed 43 per cent of Nestlé’s overall revenues and were expected to further
increase that share. Changing consumer lifestyle in emerging economies had increased demand for packaged food,
whereas buyers in developed countries preferred fresh foods. In 2014, sales in emerging markets was growing at 8.9
per cent as compared to only 1.1 per cent in developed countries. With changing consumer tastes in Europe and
China, Nestlé concentrated more of its focus on India.
In 2014, Nestlé reported US$623 million in sales of Maggi noodles, table sauces, and other products in India. The

brand name Maggi became interchangeably used to refer to noodles in India. India’₹40 billion noodle market had
many players, but Maggi controlled 63 per cent of the industry (see Exhibit 2). A 2014 consumer survey declared
Maggi one of the five most trusted brands. Future sales forecasts revealed a growth rate of 50 per cent by 2019
against base figures in 2014.
Therefore, resolving the current Maggi crisis was of extreme importance to the Nestlé management team. The
senior leadership team was confident that it could regain its market status as one of the most trusted and preferred
brands in India. The relaunch strategy needed to be both effective and timely to retain control of the market, which
was threatened by Maggi’s main competitors including Patanjali (Patanjali Atta Noodles), ITC Limited (Sunfeast
YiPPee! Noodles), Nissin Foods (Top Ramen), and Hindustan Unilever Limited (Knorr Soupy Noodles). Nestlé’s
international market was also a concern. Indian-manufactured Maggi products were directly exported to Canada,
the United Kingdom, Singapore, and Kenya, and sold through third parties in the United States, Australia, and New
Zealand. Regaining these markets after a long absence could become a very difficult task.
THE EXISTING POSITIONING
All previous promotional campaigns for Maggi had consistently communicated a sense of happiness. Some of
Maggi’s most successful projects in India included the following three marketing campaigns.
Me and Meri Maggi
In 2009, Nestlé India launched the highly successful “Me and Meri Maggi” campaign. It was launched to celebrate 25
years of Maggi’s presence in India. The rationale was to bring consumers closer to the Maggi brand. Children who had
grown up with Maggi as a regular food were now adults, and some of them had unique stories to tell. People were asked
to share their memorable stories on any topic involving Maggi, such as “Maggi on a Roadtrip.” The campaign was a
resounding success with over 40,000 stories submitted by devoted Maggi customers. The heartfelt stories included some
emotional and private moments involving Maggi (see Exhibit 3), and the 50 best stories were printed on Maggi
packaging. The project also asked customers to submit filmed stories, of which three were chosen to be featured in Maggi
advertising commercials. The marketing group that managed the project for Nestlé was overwhelmed by the response, as
they noted:
We realized that there [was] a huge cluster of Maggi stories that were adventurous, naughty, and
romantic. This gave birth to the three flavours: the adventurous stories inspired a spicy flavour that we
named “Thrillin’ Curry,” the naughty stories inspired a khatta meetha tomato flavour that we named
“Tricky Tomato,” and the romantic Maggi stories inspired an aromatic capsicum flavour that we called
“Romantic Capsica.” The television commercials were consumer stories, one picked from every
respective cluster that best represented the mood.
Meri Maggi: Two Minute Mein Khushiyan
In 2012, Maggi extended the earlier stories campaign and positioned Maggi as a source of happiness for its
customers. The idea behind the extended campaign, named “Meri Maggi—two-minute mein khushiyan,” was
explained by the marketing group as follows:
The idea really came from the simple insight of how Maggi noodles delivers joy to consumers across India and the love
that they have for the brand. Whenever you think “two minutes,” you think of Maggi. And Maggi is all about
“khushiyan” [happiness]. Put the two together and you have a simple, relevant-to-the-brand idea of “two minutes mein
khushiyan.” With this idea, we re-emphasized the brand’s evolution from a functional two-minute proposition to an
emotional two-minute proposition.

#HealthyIsEnjoyable
The launch of Maggi’s new product variation “Oats Noodles” brought together “brities” (celebrities) with Maggi in
selected advertisements. Madhuri Dixit Nene, a famous Bollywood star, positioned the new variant as a morning
breakfast alternative. The campaign leveraged the power of social media to reach to its potential buyers. The
campaign ran a selfie contest using the Twitter hashtag #HealthyIsEnjoyable.

QUESTIONS BEFORE YOU

1. How should Maggi make a comeback with respect to price: (a) with same price, (b) with increased price, (c) with
reduced price, per unit?

2. What can be alternative positioning for Maggi in comeback (think creatively!)

EXHIBIT 1: INDIA NOODLE VALUE MAP

Perceived Benefits
 EXHIBIT 2: INDIA NOODLE MARKET SHARE BY BRAND SHARES (%)

Brand Company 2011 2012 2013 2014

Maggi Nestlé India Ltd 60.58 59.67 61.64 63.11

Sunfeast ITC Ltd 3.40 5.30 8.31 10.81

Bambino Bambino Agro Industries Ltd 6.43 5.84 5.43 5.10

Top Ramen Indo Nissin Foods Ltd 4.69 3.91 3.35 2.50

MTR MTR Foods Ltd 1.59 1.47 1.35 1.31

Wai Wai CG Foods India Pvt Ltd 0.42 0.50 0.67 1.26

Ching's Secret Capital Foods Ltd 1.47 1.35 1.27 1.19

Knorr Hindustan Unilever Ltd 2.49 2.08 1.79 0.83

Smith & Jones Capital Foods Ltd 0.25 0.33 0.43 0.65

Taii-Paii Maruthi Quality Food Products Ltd 0.24 0.30 0.42 0.60

Savorit Savorit Ltd 0.64 0.60 0.58 0.56

Nissin Indo Nissin Foods Ltd 0.60 0.53 0.51 0.50

Bluebird United Agro Industries 0.62 0.52 0.44 0.40

Horlicks GlaxoSmithKline Consumer Healthcare Ltd 1.59 1.16 0.85 0.38

Mom's Choice Prayag Foods Pvt Ltd 0.33 0.33 0.28 0.25

Leong Leong's Food Products 0.10 0.08 0.06 0.04

Sams Sams Food Products Ltd 0.08 0.06 0.05 0.04

Wai Wai Nepal Thai Foods Pvt Ltd - - - -

Private label Private Label 1.16 1.19 1.23 1.26

Others Others 13.32 14.78 11.33 9.21

EXHIBIT 3: EXISTING POSITIONING